The Canadian Investor - How to Handle Emotions and Achieving Financial Independence

Episode Date: August 28, 2022

Simon interviews Courtney Stephens. During the episode, they talk about the following topics: Financial literacy and some key concepts that every Canadian should know How to handle the recent volatility in the stock, bitcoin and crypto markets Financial independence and why the FIRE movement is not an all or nothing proposition Some of the recent bank runs and scandals in the crypto lending space Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Courtney's Twitter: @TheCStephenSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. My name is Brayden Dennis, as always joined by the legendary Simon Belanger. Simon, you did a great episode with Courtney Stephen on the back half of this show. And you're like, hey, let's record just a back

to basics show and go not just like basics, but like focus big picture on what really matters in the way that we think about managing our finances. I was like, that is a damn good idea. Let's do it. Yeah. Yeah. We talked about a lot of fun stuff, Courtney and I, whether it's financial literacy, we talked about investing in general, handling volatility, but a little bit of crypto talk, of course, it's always- Get you two guys in a room. Yeah, exactly. What's going to happen? It's hard not to, but it's not just that. And it was good because when I reached out to Courtney, he said, you know what? I've been really thinking about financial literacy, talking to people about it. And I thought it was a great topic. So if I had to ask you, Braden,

give me two things that every single Canadian over the age of 10, let's say, well, the age of 10. Oh, yeah. Can I do over the can I do the age of 18? So they can legally, you know, go ahead and make their investment portfolio. Let's do the over the age of 18. So two things they should know. Okay. Because before that, you know, get your paper route, hustle it out. I don't got anything for you. No.

Okay. Let me answer your question. So I'll take it in two parts. Number one, you got to be able to spend less money than you make. Like how elementary is that? But it's so true. And say you're like a student right now, you don't have any income. You're just going to have to budget your way and try to hustle it out as long as you can

until you're making money. But let's say you're just working a job, normal person. You got to be able to spend less money than you make. And a significant amount of Canadians are not doing that every year. Many Canadians are not investing anything. Many people around the world are not investing anything. So part one, you got to be able to spend less money than you make. What do you do with it? You have to know at the minimum how to build an index ETF portfolio, whether that's opening up a brokerage account and dumping, I'll give you a Canadian example for an ETF, your entire lump sum

and dollar cost averaging it into XEQT, which is like one gigantic basket of stocks held around the world. Or use Vanguard's VGRO, which is like an 80-20 split. Gives you 80% stocks and 20% bonds. Anyone with an internet connection can do this. I don't want to hear excuses. It's so easy and you don't need a lot of money. You just need like, what's the price of one executee share? It's like 20 bucks. So if you can spend less money than you make, you put the rest in dollar cost average into index ETFs, you will compound wealth. You will over a long period of time. It is not going to take one year. It's not going to take two years. It's not going to take 10 years. It might take 20, 30, but anyone can do this. Yeah. And I think it's important just to get back to the basics here,

to do that with money that you don't need to cover your living expenses. So that's why I think it's important too, that you need to make more than you spend and definitely make sure you have a little bit of a cushion. At least if you're younger, you may not need as much because you might have some fallback. You may be living at your parents. But that's also a great way to actually invest more as you may not be in your top earnings years. You may be in your least expensive years at the very least. So you can take advantage of that as well. And when you're younger too, I kind of recall when I was in my late teens, early 20s. I mean, I know sometimes it's difficult because you have your buddies.

You want to go out. It costs money to go out. You want to go on a trip. And I think it's just being able to sometimes say no, but still enjoy yourself. Just creating a balance between thinking about the future and enjoying the present. I think from my experience, that's the best way to do it. That way you don't regret not doing things, but you also don't regret having not put any money aside in some index funds like Brayden just mentioned. Yeah. Another thing too is like if you've ever been in a tight pinch money wise, which I think most people, unless

they were born wealth into a lot of money, have been in at least once in their life, it's not fun. It ain't fun at all. And so that delayed gratification might lead to a lot more net happiness if you're not month to month trying to stress out your financial situation. So let's break that down into a couple of steps because I agree what you said is like, okay, you should probably have, like, don't just YOLO all your money into the index ETF. You got to have some sort of step process and priorities. So let's brainstorm them together. Number one, pay off high interest debt. Would you agree with that? Step one, pay off that credit card debt. If you have to refi, do it. Get rid of the high interest credit card debt.

Number two, emergency fund. Would you agree with that? Oh, yeah. Yeah, definitely. Anything in between those steps? I'm trying to go in order and this is completely off the cuff. I don't have anything prepared here. No, I think that that's a good one.

At least a couple months of expenses. For me, the sweet spot is like three to six months, but I think it depends on everyone's situations and what types of fallbacks that you could have as well. And then I would do a hybrid of paying off like medium debt and opening up like a TFSA and dollar cost averaging into index ETFs. Like really starting to begin that snowball of wealth creation, doing that. And it's very easy to start doing. Yeah. And almost getting used to putting money on a regular basis. Because once you're used to it, and once you're used to not seeing that money as part of your normal expenses as money that you have available to you, because it's already gone,

doing those automatic contributions, I think that's a great tool. All good banks will have that option where you can contribute whether it's paying a bill or a transfer automatically on whichever interval that you want. You can set it daily, weekly, bi-weekly, monthly, doesn't matter. There's really no excuse and having it done automatically just removes any of the potential. Well, you know, I won't do it this time, but I'll do it next time. And then that kind of, you know, next time you don't do it, oh, it's okay. I'll do it the following time. So, that just makes it way easier in my opinion. Yeah, totally. And you're hearing this and it's like, well, Braden, you're not practicing what you're preaching. You have 100% of your portfolio in individual equities. And yes, while that may be

true, there was a lot of learning in between that. And I just did steps one to three with index ETFs to six-figure portfolio by my 25th birthday without investing really in any individual securities until maybe a year or two before that. So I was doing like five years of that very simple basic plan and it was compounding well. I mean, I got market returns and market returns is better than what most professional money managers get. Yeah, no, that's good. I think that was a good overview of just some basic concepts, just going back to basics here. Now, we'll lead it back to my interview with Courtney. It was a great chatting with him. It's always

great chatting with him. I hope everyone enjoys the interview and we'll catch you next week with a regular episode. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people

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Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Welcome back to the Canadian Vestor. I'm here with Courtney Stevens. Courtney has been on the Canadian Vestor before, has been a couple of times. It's been great having conversations with you, Courtney. So before we get started, how's it going? How are things? Man, things are going well. It's summertime. I think this is the point of the year where

we're complaining about it being too hot. So we're spoiled, man. It's good. Yeah, exactly. I can't believe we're complaining about being too hot in Canada, at least. I mean, in Ottawa, it gets really cold in the winter. So I'll take it. I don't mind 35, 40 degrees, maybe above 40. It's a bit hot, but no, definitely enjoying the summer. And I know you've been, well, if you want to tell people a little bit of what you do, your background, I know you're working the community a lot. And I think that'll be interesting just to get your take on what's going on with people that you're talking to, especially when it comes to the markets right now. Yeah, so my professional background, I started out playing pro sports in the Canadian Football League.

I did that for seven years. And then I made a pivot during the, I guess, 2020, 2021 pandemic years towards finance. I started teaching financial literacy online. And then when schools opened up, I was going into the schools and I still teach basic financial literacy, financial education where I can, but my daytime job full-time, I work in the community partnerships department for a company called the Hamilton Sports Group, which is the ownership group behind the Hamilton Tiger Cats of the Canadian Football League. So we get to work with all the young athletes, all the nonprofits, all those good folks who fill up a football stadium on the other stuff. So I talked to a ton of people who were just civilian citizens. They just have from every walk of life. And I get a sense of how times like right now are affecting different people. So from the teacher to the investment advisor to the gas station clerk and just getting the different takes on how the current market conditions are affecting each different type of person is pretty intriguing

stuff for a finance nerd like myself. Yeah. So when you talk to people, what comes up the most often? Because I recently I talked on the podcast. I went to the casino, I like to play poker every now and then. And I was just talking to one of the dealers there. Never mentioned I had a podcast or anything like that, that talks about investing. And you know, the big I word came up pretty quickly without being prompted. So inflation, I was saying they had a shortage over there because they just can't get enough dealers. A lot of them quit or change professions. I guess a bit like you, right?

During the pandemic, a lot of people ended up doing something else. So are you hearing that from in the community or when you teach people about financial literacy is inflation the first thing that comes up or are there other preoccupations? Oh, no, that's definitely number one. Everybody's noticed that the cost of gas, the cost of groceries, those are the two main things that are the bane of everybody's existence. They're making it tough to stretch the paycheck these days. But another thing that people are becoming more familiar with that they weren't before are interest rates. A lot of people in my age cohort,

they might be getting into their first or second home that they own. And now they're more focused on things such as the interest rates and how those affect their daily life, whether they have revolving line of credit, like a home equity line of credit, or they have some kinds of loans that they've taken out and like a car loan, for example, with a variable rate. And they're starting to see how the interest rate changes affect them on a day-to-day basis. And also people in those cohorts, they might have started to accumulate a pension, or they might have started out investing like a lot of people did over the pandemic. And they're seeing how both inflation affecting companies and how interest rates

changing have had an influence on capital markets. So like equities, stocks, and then things such as Bitcoin and every other cryptocurrency. So we're seeing a lot of everyday normal people putting finance and monetary policy type terminology into their everyday language because it's hitting home. And I think that just speaks to the magnitude of the things we're seeing this year that a lot of us, you know, I'm early 30s. A lot of us haven't had a chance to live through during our working years yet. Yeah, that's a great point, especially right during the pandemic. And I went or I recently went on a podcast for an interview. And they were asking me about what kind of tip do you give people to handle the current

markets? And it's, you know, you have a lot of people that started investing in March, April of 2020, a lot of people got laid off, they were eligible for CERB or government benefits in the US. And you know, some people were just able to have that extra money to spend because they weren't doing their normal activities. So you might as well do something with the money. And everyone was a, you know, everyone was a genius, right? It was a bull market. If you start investing March, April of 2020, pretty much everything that you touch turned to gold until probably late last year right more or less yeah exactly so if you have like younger people whether it's your age and i mean i guess i'm sort of the

same age group as you but if you have a bit younger people that haven't gone through that do you have any tips for them on how to handle that volatility and you know not just going out of the markets because you're kind of fed up and just selling everything and just say, I'm never going to come back type of deal. Because I feel like some people may just have that approach. Well, absolutely. And I think I've had the benefit of a little bit of formal education going into this, which helped me. At least that's what I found. Knowledge is always power when you're going through an unknown situation, right? If you can rely on a little bit of some anecdotal information, I haven't necessarily been through a recession or multiple

months of just drawdowns personally, but I've learned about them before we got here. So I was able to prepare myself financially and mentally. So one thing to know is that markets are cyclical. Now, what does that mean? That means that even the healthiest of markets, and a market is just anywhere where two people meet to exchange goods, services, products, stocks, whatever it is, it's a place where buyers and sellers meet. The healthiest market, when the price of something is being discovered, that price is going to go up, that price is going to go down, whether it's real estate, whether it's stocks, no matter what it is. So we can anticipate that if in the past, the price of, let's say, real estate, it's gone up, it's come back down, it's gone up higher,

it's come back down. If we currently find ourselves at a place where the prices have been going down, you can rest assured that they will not go down forever. Now, that's a very general statement, but it's a little bit of a silver lining to say that if we're younger or earlier in our investing career, you don't actually want the prices of everything that you're buying to just go up nonstop because that is part of the reason why it's been tough for my generation, the millennials. They're having a hard time getting into the housing game and buying their first property. A lot of people have had to leave their hometowns, move to smaller towns way outside of the city limits in order to be able to afford something. It's very rare that a person is able to buy a home in the city that

they grew up in where I'm from, which is just outside of Toronto. So the fact that the market is cyclical and we currently find ourselves maybe on the down slope, maybe close to the bottom, in some respects, that can be considered a positive thing for people who are just entering the markets for the first time, whether we're talking real estate or we're talking equities, even if we're talking about Bitcoin, because it's allowing you a different amount of access that you wouldn't have had before. Now, do these things last forever? No, but who knows exactly how long these cycles last? And these cycles can be extended, deepened, heightened by all of these factors that we talked about, like the interest rates that have been changed, the inflation that was

experienced from a number of different causes. Some of them are man-made causes, such as the government gave a lot of people money and that money was chasing a fixed number of goods. So the goods got bid up, right? It's a part of a cycle. Another element of this was, you know, there's war happening, right? So when wars happen, that changes trade relations, it changes the availability of goods, it changes people's priorities domestically and internationally. So that has an impact on the supply of certain things, maybe the fertilizer that goes into the food that you eat or different crops that are necessary to make a lot of food. So there's a lot of what they call macro economic factors, which is just big picture,

bigger than any one city or one town or one region. These are macro overlying like a huge umbrella factors that affect everybody, right? And sometimes they affect the whole country. Sometimes they affect the whole world. And right now there's a number of macroeconomic factors that are lining up to make it tough for the markets. So there was a lot of slowdown in trade because people weren't working through the pandemic. And then starting up those jobs again and getting those goods produced and then getting them shipped all across the world, that just doesn't happen overnight. So a lot of different things have gone into the cycles that

we're experiencing. And so for somebody who hasn't been through all of this, I mean, myself included to a degree, but you can go back and you can listen to people who have done their homework and distilled down hundreds of years of research and studies. I mean, it's the era we live in. There's really no excuse for you to be completely ignorant if you have a desire to learn. There's people sharing free information everywhere you can look. But a cycle like this, it doesn't last forever, but it might be deeper and longer than it would have been

without some of the man-made catalysts that were poured on top of those existing macro factors. We had the war. Well, we have the war still going on. You've had the trade slowdown. You've had the work stoppages from the virus. You've had the influx of capital into the markets. And I think it takes a little bit of time for those things to work through the system. But eventually, one day, I think it will all balance out. And those who are able to weather the storm and stay the course, they'll be the beneficiaries. Yeah, exactly. So that's what I've been telling people is, and in my view, there's a lot of opportunity right now if people have money to invest, as long as they have the. Basically, an extended bear market, the whole time you're investing,

you're, you know, 20 years of bear market, and then when you start needing the money, you enter like a crazy bull market. That's the best case scenario. But people, they don't really think about it that way, right? People get really ecstatic when everything goes way, way to the top, but, you know, it's actually the best possible outcome is, you know, having depressed prices,

buying more units or more quantities. And then when you do need the money a year or two before that, things start going way up. That's the best, best case scenario. And you kind of got to reprogram your brain because if you're getting your primary information from Bloomberg, BNN, CP24, MSNBC, they are there to sensationalize things and to strike fear into your heart because that's what captivates people. It's like you don't go to the movies to watch a story that just works out from beginning to end, right? You need the drama. and being in the media business,

they understand that what allows them to sell to the companies that market on the commercials is the max number of viewers. You get viewers by scaring the heck out of people and keeping them glued to that screen. So one thing you could do as an investor is replace a little bit of that emotional satisfaction you get from just checking to see how bad the world is going to reading up on something to reframe it. This is actually a great opportunity, an opportunity that only comes around once every five, 10, 15 years. And then it's almost as if you're winning the lottery, so to speak, in terms of, you know, despite the fact that many people are down bad, right? I'll call it what it is. It hits people differently depending on where they are.

But if you're in a position to take advantage of the economy where it stands, then you can really set yourself up for 10, 20, 40 years from now. Even if, let's say you're 30 years old and you're going to retire at 65, which is 35 years away, the average life expectancy in Canada for a male is 77 years. So you really have from 30 to 77 is almost 50 years worth of money, right? So think about what a day-to-day price action of a stock really means when we're talking about 50 times 365, right? It's such a dot on your timeline. It changes your perspective. And then you start thinking about it of, okay, well, you know what? I wish I could get my money into my brokerage faster because on those red days, I'm actually trying to buy. Instead of being afraid and

thinking about how those red days are dropping your portfolio value over time or the net worth over time, you're just trying to get a little bit more bigger piece of the pie. So when everything turns green, man, you'll be happy with the moves you made during the bear market. Yeah, I mean, I totally agree with that. It's just people, I think they just need to reframe it. And even people who are close to retirement, like you just mentioned, it's not like, you know, the day you retire, you're going to sell all your stocks. Like you're going to need an equity allocation, maybe a little bit of Bitcoin if, you know, your risk appetite's a little higher. Obviously, the conventional wisdom, having some fixed income as well, a higher proportion as you

get closer to retirement and into retirement. But if we go to financial literacy, so I'm sure you talk to a wide range of people. I know I do. You know, the knowledge is from just starting to learn investing all the way to basically being a professional money manager and anywhere in between. And I find a lot of people get overwhelmed because they'll watch CNN, NBC, BNN, and they hear all these terms being thrown out. And then they just decide, oh, you know what, I'll just go to my bank and I'll just do whatever they tell me to do with my money, which usually I'll be paying 2% fees for mutual funds. If people want to get started, like is there like one or two things

that you really recommend doing? Like personally, I'll usually recommend that, you know, probably the most important concept in my mind, just understanding compounding, how it works and how powerful it can be, but also how painful it can be if you have credit card debt, for example, and you're just paying the minimum and you're getting that 20, 21, 22% being applied month by month and just

compounds and it hurts you really badly. So are there a couple of things, whether it's concepts or just how resources to help get people started if they have really little to no knowledge? You know what? There's so many places we could start. To your point, compounding eighth wonder of the world, those who understand it benefit from it. Those who don't understand it end up paying it. That's one of the places I'd love to start. And that's just the idea that the money you have as it grows, the growth of that money also continues to grow with the principle. Princi principle being the initial investment and the interest being what grows on top of it. It's like moss. It's just you sit it

there and it's the kind of mold you want. You want that old moldy money that's just you look at it once in a while and then you come back and there's more of it. Money is one of those things where we feel like we must do something about it. But with investing, sometimes the best course of action is actually to do less or to not. One of the main catalysts for me to get into the finance world was really the idea of early retirement, because I think one of the biggest scams in the world is the idea that we should retire at 65. I've had the opportunity to have what I would call a full career that was seven years playing professional football, and I retired, quote unquote, from that. And I've transitioned into another line of work. And just from the accelerated deterioration of my physical

body, my being is not the same as it was when I was 20. You still look pretty good. I'll hand it to you. I appreciate it, man. But you know what? I've put some mileage on my body so I understand that what we have, it doesn't last forever. So why would I put off all the things I want to do till a time when I don't know if I'll be able to do them? So the first step that I say with financial literacy is don't, I mean, yes, set goals, but understand why you want to reach those goals and then backtrack to today and find out where you are in relation to those goals. Because yeah, maybe you do want to retire at 65. Maybe you

do want to retire at 60. Maybe you want to retire at 45. But how are you going to know what your target is in order to actually retire? So you have to look at one month and see what does it take for you to live for one month? Now, life is going to change. Maybe you have no kids and later you'll have kids. Maybe you have no car and later you'll have a car. Maybe you have no kids and later you'll have kids. Maybe you have no car and later you'll have a car. Maybe you have no house and later you'll have rental properties. That's fine. But start where you are with what you have, do what you can, and just look at all of the essential expenses that you have, write them down, and just say, you know what? If all else fails, everything hits the fan, this is the minimum amount of money I'm going to need to survive each month. Then once you see, let's just put a round number on it. Let's just say it's $1,000.

That would be amazing. But let's just say it's $1,000 that you need to live every month, right? I want your trick if you're living on the $1,000. You know what? I can't do public math. So that's why I need super round numbers. So if it's $1,000 that you need to live every month, then you try to put three months in the bank. And now I don't say put $3,000. try to put three months in the bank. And now I don't say put $3,000. I say put three months because actually what you're putting in there is you're buying yourself time to find out what your next move is if the one stream of income that you have is no longer a viable one. Ultimately, I think the biggest mindset shift is that we trade our time

for money. We trade our money for things. So if you take out, you know, we trade our time for money. We trade our money for things. So if you take out the middleman, we trade our time for things. And ultimately, the amount of money you accumulate is the amount of time that you have banked that you can trade in for things, experiences, opportunities, networks, access. And so when you can quantify how much time you need to sacrifice in able to buy yourself opportunities, then you start looking at your money different. You're like, man, really, do I really want to supersize these fries? Because that's, I mean, you're not going to say that's another 15 minutes, but you might actually stop a little bit and hesitate before you get rid of

that hard earned money. Even if that money was compounding in your account, even if it came from dividends, even if it was rental income, you know the cost of that money and the cost of it is actually time, which is our most scarce resource. So in terms of financial literacy, this is the first great paradigm is that learning the correlation between your time and your money and what that actually means for your lifestyle. Because at the end of the day, what we really want is a lifestyle, right? You could put a million dollars cash in the middle of the floor, immediately nothing changes. It's still the same house, still the same hardwood floor, still the same carpet, same everything. You have to take the money and spend it. So detaching the goal from money and starting to think about the lifestyle and then how much money you need to buy one month of your time.

That's a great building block. And then you can extrapolate that out to see what would it actually take for me to retire? Yeah, no, that's a great point. One of the best takes I've heard when it comes to financial independence, because obviously there's the FIRE movement. So financial independence, retire early for those who are not familiar, which goes really's the FIRE movement. So financial independence, retire early for those who are not familiar, which goes really to the extreme, right? Like it's really you're cutting out pretty much everything that's not essential. I'm more, you know, of the mindset, like trying to create a balance because, you know, I'm 37. I think I'm in good health,

but, you know, I hope I'm going to be here in 10 years from now. Exactly. But I'm also aware that we all have a expiration date and we don't know when it's going to happen. So I think for me, it's really important balancing that. And the take they said is just look at your expenses and, you know, cut out what really doesn't change much in terms of your happiness and the rest. You keep it so if that's starbucks coffee that costs you six dollars every day but you know you really get some enjoyment out of it then keep it don't cut it out keep it there but if there's something else that yeah you do pretty frequently but you tell yourself you know what if i did not do that, I'd save an extra $15, $20 every time

that yes, cut that thing. Because at the end of the day, right, it's always about the pursuit of happiness. I think, I think that's all what we want to achieve. And I think too, for people, just to add to what you're saying is define what retirement is for you because you mentioned 65 but maybe for someone retiring is quote unquote retiring at 45 or 50 and then getting I'll just use me but getting a part-time job at the local bike shop because I really love doing that and doesn't even feel like work even though I'm still earning a wage and probably other income at the same time, that for me would be like an amazing retirement, even though I'm still technically working, right? Yeah. And not to turn this into a fire show, but there's different flavors of fire, right? I don't

necessarily prescribe to the idea that you got to put a brand on your financial lifestyle, but they call something like coast fire, where more or less you get enough assets locked away that if you didn't invest another dollar, that eventually when you hit that date, wherever it is, 50, 60, 65, that you could live off of those assets as they mature. And in lieu of having that and waiting, you can live off of whatever job is able to sustain your lifestyle. So same to your point. Maybe you don't need to save up $2.5 million nest egg. Maybe you don't need to have five rental property portfolio. Maybe you just have to save up X amount, trim the fat, and then that would allow you the freedom to have decision power. Because ultimately,

that's what we all want. That's why we tune into these shows. That's why we look at those charts and stuff. Of course, some people do it for a rush. But if you really are thinking about the key here, it's a lifestyle. And the lifestyle that people want is a lifestyle of choice. So if we could be disciplined early, if we could be calculated early, and if we can have a little bit of luck, because that absolutely plays into it, I think that there's a lot more options available to us than we might realize at first glance. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them,

you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. dot com for details. That is questtrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February

and March in an Airbnb in South Florida for a combination of work and vacation and realized, for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Is there anything else you wanted to add on financial literacy? Because I want to ask you a little bit about what's going on in the crypto world as well. There's been a lot of movements. I don't know if you wanted to add, like, talk about something before we switch over to that,

because I definitely want to hear what you have to say regarding that. You know what? I think there's a lot of lessons that actually cross over from being in this bear market, general financial literacy and just prudent finance, personal finance, and some lessons that we could take away from some of these crypto companies and these Bitcoin miners. One thing that I say, and it's related to what we just talked about is they say cash is trash because you will have a drag on your portfolio if you're not fully invested. But when the market is going down, you have to understand the difference between risk capacity and risk tolerance, right? Your risk capacity is the mathematical limit to what you can sustain in your portfolio and still be able to hit your goals. But that's your risk capacity is the mathematical limit to what you can sustain in your portfolio and still be able to hit your goals. But that's your risk capacity. Your risk tolerance is emotional.

So you may emotionally have a way lower tolerance for risk than what you're mathematically supposed to be able to withstand because of your age or because of your income or because of the assets that you already have or vice versa. You could be older, closer to your financial destination, and your risk tolerance could be way higher than your risk capacity. And so you could blow your account up. I say all that to say what we can learn from these crypto companies that have been going bankrupt and from these Bitcoin miners who have been forced liquidators of their digital assets is that it always pays to have cash on hand when the economy is bad and money isn't coming in like you thought it would.

Goes back to the original thing that I was saying, what are your monthly expenses? As a business, it's the same thing. You've got fixed and variable expenses every month, operational expenses, they call it. If you can't meet those, then something's got to give and you're going to become a forced seller. So if you want to have what they call diamond hands, you don't get them just from waking up in the morning. You got to do something to develop them and earn them. And that generally speaking comes from having a healthy cash position. Because if I know that I can afford to live for the next three months without selling any of my stock, without selling any of my shares, then that liquidity risk that I took on from putting my money into an asset that's loaned out to somebody else that I can't

actually get, it's not going to bother me as much. And this is something we saw in the crypto companies. They were locking up their funds in VC capital that really you can't get access to until a certain lockup period passes. Or we see the same thing with these Bitcoin miners. They have liabilities in dollars, but their assets are all in Bitcoin and the Bitcoin's value is dropping. And so they're looking at their liabilities. They don't have any cash. They're forced to sell their prized asset. So you can solve both of those problems by keeping a sufficient amount of cash on hand.

And as personal finance, like in our own lives, I think we would all do well to have just a little bit of cash in case things don't go as planned. Yeah. Personally, I have closer to usually it's four to six months worth of cash on hand. Some people may be able to do a bit less, but you have to realize that if you do less than that, you know, you just give yourself a bit less time. So I think that's the only thing, right? Exactly. And different people's life circumstances are different. If you're just out of school, living at home with your parents, you could probably get away with having one month cash. And if you're a father of three with the only person earning money in the house, then you probably can't get away with just having one month of cash. So it's changes from situation to situation. But I think we can learn a little bit more if we dig into these crypto companies

and these Bitcoin miners, because they've been making headlines and not for all of the reasons that you'd hope if you're into crypto, if you're into the Bitcoin thing. Yeah. Yeah. So I'm assuming you're talking about amongst other things, Celsius has been really prominent, right? As one of them, I think there was three arrow capitals, a lot, and obviously Terra Luna, the whole fiasco there. And for me, I think it's definitely a lesson learned for a lot of people. I did not have any exposure in that. I tend to, you know, I just huddle. That's what I do. I keep it self-custody. So I know I don't have to deal with the fallouts of an exchange, potentially defaulting. And the laws are still kind of murky

when it comes to that whether you would still have you would have recourse for your deposits so that's why I do self-custody but for a lot of people I think it's just a good reminder that there's I think it's a really exciting space I'm still really bullish on Bitcoin still am on Ethereum as well but more on Bitcoin, I would say. But I think it's a reminder for me and a lot of people that there's still not a lot of regulation in that space. And when there's not a lot of regulations, some things can be pretty opaque. There's not a lot of transparency, especially for these kind of centralized quasi banks, I'll say. i know they're not banks but

let's be honest they act like banks and there's no regulations and this is what happens right celsius was turning around and doing some risky really risky lending with people's deposit and then when crypto took a turn for the worse, then things all crumbled essentially. And I think this is a good time to point out some of the differences because things get lost in the headlines. You have traditional finance, which is shortly called TradFi, right? And that's your banks and your brokerages, your Quest trades, your TDs, your Royal Banks. That's traditional finance as we've all known growing up, right? Heavily regulated, lots of oversight, tons of government agencies making sure everybody crosses their Ts, dots their Is. Then you have this crypto world where there's decentralized

protocols that programmatically respond to what the users put in. So it's like a protocol run by nobody. It's a smart contract. It's a computer program. So that's called DeFi. So you had TradFi, then you have decentralized finance as DeFi. And then somewhere in the middle, you got CeFi, which is centralized finance, which is these companies that you're talking about. It's the Voyagers. It's the Celsius of the world. It's the BlockFi. It's all of those ones. And those companies don't have the same degree of oversight to what you're saying as the traditional finance companies. But because they don't have the same level of oversight, they're able to participate in

DeFi to varying degrees and with varying levels of risk. Now, they're using the same tactics that TradFi uses, but in an unregulated world where not every DeFi protocol is created equally, that can get hairy very, very badly. And things that have never happened before tend to happen every day in a world that's brand new. So what was actually happening was they were running, I guess it's called interest rate arbitrage. It's the same thing that your regular bank would do. So they borrow money for a short period of time, and then they lend it out for a very long period of time, right? So you might deposit money at, I'm name dropping, but you deposit money at EQ Bank or something like that. You're a sponsor, so well done. There you go. I listen to the show. So you deposit money at EQ Bank and then EQ Bank

might turn around and lend it out on a mortgage to somebody. So they might pay you 1.5%, but the mortgage, just for an example, might cost somebody 4.5%. So in between, they're making the spread. They're making that 3% profit. They're paying you 1.5%. The other person's paying them 4.5%, right? So that's pretty much the same thing that was happening with these CeFi companies is they're saying, okay, you have Bitcoin. Bitcoin is a bearer asset. When you hold it and you own it, it's really yours, right? Nobody else has it. But if you give it to us and let us hold it, then what we'll do is we'll put a credit on your account and we're going to loan it out to somebody else,

right? So then they are loaning it into these DeFi protocols, which are unproven. They haven't been around for that long and they didn't even know if they were really viable. And what was really the thing that was mind blowing to me was how many different CeFi companies, again, centralized finance, how many of these centralized crypto banks were It was that one counterparty that was victim to a huge DeFi collapse. And then all of the collateral pretty much went to be almost worthless, right? And so the loans that they had to pay back to these DeFi companies, they couldn't make good on them. And the people who suffered was the individuals who were putting their Bitcoin or putting their Ether or putting whatever it was into these companies. Now, they came out to varying degrees based on how their business model was set up, based

on whatever parameters they had to protect the customers. But as customers, I think we need to, well, I wasn't a customer, but as individuals, I think we need to understand the benefit of having something like Bitcoin is that you can actually look on chain and see who owns it. When you submit it to another company, it's not yours anymore. They just have an IOU. And that's how it works in traditional finance, but there's insurance to back you up. There's government agencies to make sure that they're doing attestations about what they actually hold as assets government agencies to make sure that they're doing attestations about what they actually hold as assets. And they make sure that the counterparties aren't taking unscrupulous

risks with your money. And if that's absent, then that responsibility falls on you, the individual. And so I think this just all goes to highlight the value of something like Bitcoin where you actually hold it. And I'd hate to see in the news people conflate Bitcoin and DeFi and CeFi because these are three different levels of self-sovereignty, of ownership, and they're different layers of money, quite honestly. And when you deposit your money at any institution, you have to understand that you no longer actually own that. Somebody else owns it and they have a liability to you. So it's a great lesson for those who are able to recover from it. But unfortunately, there was a lot of collateral damage.

Yeah, sorry. My dog was, I think, dreaming a little bit in the back. I saw you turn and you were talking to the dog like, hey, do you got Bitcoin? You got Bitcoin dreams? Because I got Bitcoin dreams, man. I'm so glad that I dodged that bullet. I think it takes a little bit of luck and being in the right place at the right time, because who knows? I could have got, I can say greedy, but I could have put my money in one of these companies and tried to get some yield, but I just didn't think it was worth it with what was going on. Yeah, I didn't think either. And I think just one thing I wanted to touch is, you know, people are easy, those that hate crypto as all right, there's just people where you can try to

reason with them, they'll never like crypto, they'll never be open to it. And they'll use these examples that we talked about as a reason why. But people have a short memory because when there's a lack of regulation, you know, you just need to go back to 2008, 2009 and see what can happen. It's not just, you know, crypto, the crypto ecosystem, let's just say as a whole. I mean, the traditional finance, we saw the collapse of Lehman Brothers and then the US government having to bail out various banks in the US. It's not specific to crypto. And I think that's important for people to remember, but people tend to have a short memory. And when you have already a pretty strong perception against cryptocurrencies in general. I think people just use it to justify

their point of view and just put any cryptocurrency under the same umbrella. And I totally agree with you for me. If anything, this has just made me believe even more in Bitcoin because the price is one thing, but the protocol Bitcoin just kept on working like nothing happened. It just kept on working. The protocol still works. The level of difficulty adjusts depending on the amount of miners that are present. We've seen a lot of events in the past couple of years affect that, whether it's the mining ban in China and then obviously a lot of people wanting to sell their assets with, you know,

the big drawdown. I know there was a lot of people wanting to sell their assets with, you know, the big drawdown. I know there was a lot of leverage too. So for me, it just makes me a bit more bullish on Bitcoin. But I know those who got in around $60,000 US or $65,000, whatever the price they got into. I know it's not easy to see. So I think just coming back to what we talked earlier and having the long game. And if you have enough money and sufficient emergency fund, I would say at least a couple months, but ideally three months, I think you can really weather these events and

hell, just dollar cost average if you can. And you're in the right mindset, right? Absolutely. And I think there's some fundamentals you could look at to reassure yourself such as, well, the difficulty may have gone down, but difficulty is another term in relation to the hash rate, which is the overall computing power that's dedicated to the network. So I guess hash rate could be translated to the number of computers that are working on that network at any given point in time. The hash rate follows the price. So the price went down, the hash rate's obviously going to come down a few months later. But numbers that are up, the number of Bitcoin addresses with 0.1 Bitcoin in them just crossed over 10.53 million addresses. And that is an all-time high as of July 2022.

Another number that's up is Bitcoin addresses with at least one full coin, which at the time of this article or the time of this post by Glassnode, which they're an analysis, on-chain analysis company. This was from July 23rd. They said there are 888,000 addresses with one full Bitcoin or more. And that's an all-time high as well. So what we're seeing actually is while the dollar denomination of each Bitcoin has gone down and the hash rate has gone down as a function of that, because Bitcoin miners have to pay their liabilities. So they have to sell more Bitcoin in order to cover the cost of electricity and their leases and whatnot. The actual people who are using Bitcoin is going up all the time. And the reason that is, is because when networks go down, such as the Rogers network, I could go somewhere that had Telus Wi-Fi and I could still send a Bitcoin transaction, right? My banking was down and I couldn't send

the e-transfer, but because I had Bell at home instead of Rogers, which was the network that had went down all across Canada for almost a whole day, I could still send Bitcoin to somebody. And that's just one example here in real time. Another example is, you know, if the government, for whatever reason, shut down transfers from Canada to the US, they can't shut down the Bitcoin network. There's just too many different nodes running the same software that makes it a mesh of, you know, faceless, nameless computers operating this network. So no one can stop you from transacting or possessing this bearer instrument. It's like cash, but it's digital. And it's like cash because when I hand you a $20 bill,

there's no discrepancy. You have it, I don't. And that's what they mean when they say that Bitcoin is digital cash. It's not to say that you can spend it like a toonie or like a $5 bill, but it's to say that when one person has it, you know definitively that the other person doesn't. And so to be able to have those kinds of property rights is something that is valuable and it's becoming more valuable as these examples pop up across the world. But coming from a place like Canada, it's a very privileged view, right? If you think about a place like Nigeria, they put a limit on how many US dollars you can buy with Naira every day or every week because they don't want that capital flight out of the domestic currency

into a stronger currency that is being devalued at a slower rate. So being able to get access to Bitcoin is almost like a silent protest of that restriction put on you. And I think so many more people around the world, because Bitcoin is the largest international monetary network, people are realizing that it's more than just the number going up. It's the utility of having your own money that no one else can stop you from moving. Yeah, exactly. And having certainty, too, of what the protocol is, right? Because fiat at the end of the day is you're essentially banking on, you're trusting human beings to make these decisions. And politicians, like whatever politics you're following,

you know, politicians, I don't care whichever party people vote for, you know, they try to get reelected. And, you know, we see it every single election, you know, the six months prior, the year prior, they start making all these promises, spending, and that money has to come somewhere. And politicians are very predictable is that they try to get reelected. And when humans take these decisions, I mean, there can be some pretty bad things happening. And that's why I like

Bitcoin too, is there is that certainty and the nodes are so important because they're the gatekeepers, essentially, of the protocol. And I think your point on the geopolitics, you're absolutely right, right? We take it for granted. Like most people have access to a bank account in Canada. But if you go to these other countries, and I mean, we saw it with the Russian invasion of Ukraine, you know, that was terrible. And it's still terrible what's going on. It's not to put light on that. But I think it's made people realize that if the or countries realize that if you're not on the side of the US or Western nations, whatever the reason is, personally, I think it's a valid reason at this point, but it could be another situation where, you know, the reason is a bit more questionable. And then you're complete shut off of the global financial system. And having something like Bitcoin can be pretty valuable to, you know, other nations, but individuals, like you said. So I think it's really, really interesting what could happen in the future. Yeah. And I think there's a lot of debate about whether Bitcoin is an inflation hedge or something like that. I've given so much

thought to this, but really, I think where I stand today is that it's not about inflation and it's not about monetary debasement. People buy gold because if people in general lose faith in the currency, then they flight to something that will keep its value or they'll leave or flee to something that will keep its value. And that's traditionally what gold has done. I think we're in a different dimension these days and we have to think about it in a way that we haven't been able to think about things before. So we can't fit Bitcoin into an old analogy. Bitcoin is almost like a hedge on tyranny. And it's not you that has to experience the tyranny for the network to propagate. There's a lot of crazy stuff going on all over the world. to propagate. There's a lot of crazy stuff going on all over the world. And if I think that,

for example, Apple makes great products and more people are going to want to use iMessage because the experience from one iMessage to the next is so cool. And once you get into the ecosystem, you see the benefit and you don't want to leave and I'm going to share it with my friends and that network's going to continue to grow, then it would make sense for me to invest in the growth of that network and then that company. If I think that Bitcoin has similar principles, whereas the network becomes more valuable as it grows and as more people experience it, they'll see the value in not putting their entire net worth into it, but having exposure to it or having the ability to use it, whether they're here, Ukraine, Nigeria, Iran, Pakistan. If I see that there is potential for other people in the world to find value here, then that's really what the bet is on. The bet isn't on necessarily that it's going to hedge against inflation, but the bet is on more people tapping into the utility of this for

whatever it is that suits their needs in their life. And so I see the network continuing to grow. The numbers don't lie. The network is growing. And to me, it's encouraging because people haven't really had this opportunity to borderlessly transact value without somebody stepping in between and taking a vig. So it's an interesting time. I don't have my whole entire net worth in there, but I definitely have skin in the game and it's a development. I'm interested to see what the next step is for Bitcoin. Yeah. Yeah. And I think that's a good point to end it on. And same for me, right? I am really bullish on Bitcoin. And one of the most common questions I get is how much should I invest in Bitcoin? And I say, look, I can't answer that.

That's a personal question. The way I see it, I've said it time and time again on this podcast is just, you know, it's still very volatile. Will it be less volatile one day? Maybe. I don't know. Potentially. But expect volatility. And I always say I don't think it will go to zero, but I say go into the mindset that you are okay if it does go to zero. Okay. And then whether that's 5% of your investment, 2%, 1%, 10%, whatever it is, as long as you're comfortable with that possibility, which I think is, you know, nothing is zero, but I think it says very close to zero at this point that it would not lose complete value. As long as you're comfortable with that, then you'll probably have a good idea of what percentage of your portfolio to have in there.

Buy enough so that you don't wake up at 3 a.m. checking the price. Exactly. Exactly. The sleeping test. That's what I usually say is just, you know, if you find that you're waking up at night and freaking out or it's making you lose sleep over it, it's probably a too big portion of your portfolio and you probably should start thinking about trimming it a bit. Well said. Well said. Well, thanks a lot for coming. Courtney, if people want to follow you, I know you're really active on Twitter way more than I am. So where can they see you if they want to follow you? And I know you tweet about a bit of everything,

but a lot of financial, but also football, right? Yeah, I'm a sportsman. I'm a finance nerd. And I also play video games. So if you like any of the above, you can hit me up on Twitter at the C. Stephen, S-T-E-P-H-E-N. And I'll hit you back. Sounds good.

Well, thanks for coming. It was great having you again. Appreciate it, Simon. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simon may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.